Chinese Inflation Tame, But Will Inventories Rain On Oil Traders’ Parade?
???? Fundamentals
Crude Oil futures have faltered, shedding $5 rather quickly before prices stabilized yesterday. Chinese CPI was tamer than expected, with consumer prices rising 2.1% in February, versus the median estimate of 2.5%. We recently mentioned that the People’s Bank of China (PBoC) and other policymakers may actually be more concerned with growth than inflation, and the consumer inflation data all but confirms those suspicions.
Aggressive expansionary policy from China could outweigh the glut of Crude Oil in the US. This afternoon’s API and tomorrow’s EIA reports are expected to show a hearty build in Crude Oil of 1.5 million barrels, and gasoline and distillates are expected to have a drawdown of 1.8 and 1.7 million barrels, respectively. Crude Oil may get some outside support from the RBOB, as the contract is technically oversold and has a near-term bullish signal.
???? Technical Notes
Turning to the chart, we see the May Crude Oil contract dropping to minor support at the 92.50 level before recovering. In addition to finding chart support, the contract ran into the 100-day moving average.
Prices briefly traded at or below the average over the past two sessions. Failure to hold 92.50 suggests prices may test support at 90.00. Currently, the oscillators are at neutral levels and not giving traders very many clues as to the direction of the market.
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